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Gillette's Energy Drain: The Acquisition of Duracell

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Andrew Plant

on 29 March 2011

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Transcript of Gillette's Energy Drain: The Acquisition of Duracell

Gillette's Energy Drain: The Aquisition of Duracell Nikki Fader and Andrew Plant 1996 1997 1999 2000 Growth Stability Retrenchment Conglomerate Diversification Pause/Proceed With Caution Turnaround Divestment Turnaround Divestment Captive Company Corporate Level Strategy Business Level Strategy Broad Scope Wide customer range Can use products in a variety of devices Standard battery sizes Advertising campaigns Brand recognition Technological advancement Differentiation Functional Level Strategy Marketing Financial Research & Development Push Strategy Pull Strategy Price Skimming Equity Financing Debt Financing Follower P.E.S.T.
Analysis India & Pakistan maintain ceasefire in Kashmir region George W. Bush declared President of
U.S.A. U.S Federal Reserve begins to cut interest rate India's population exceeds 1 billion China makes steps to improve
human rights Portable consumer electronics market is growing Industry Trends Fewer sales through grocery and drug stores More sales through discount retailers Manufacturing batteries for retailers 5 Forces Analysis Threat of New Entrants Rivalry Amongst Existing Firms Threat of Substitutes Bargaining Power of Suppliers Bargaining Power of Buyers Worldwide Alkaline Battery Industry Moderate to High High Low to Moderate Low Moderate to High Financial Analysis Liquidity Ratios Activity Ratios Leverage Ratios Profitability Ratios Contributions by Segment May have trouble meeting short term liabilities Current Ratio & Quick Ratio Decreased Inventory to NWC Increased More susceptible to unfavourable changes in inventory Cash Ratio & NWC Decreased Must raise cash to meet current operational needs Return on Sales ROA & ROI Decreased May be attributed to increased SG&A expenses, restructuring charges, asset impairment charges & interest expenses ROE & Gross Profit Margin Increased ROE increase is due to reduction in equity Gross Profit Margin increase is outweighed by decreased Return on Sales Improved Activity Ratios Worsened Activity Ratios Inventory Turnover Days Inventory Average Collection Period Hybrid Asset Turnover A/P Period Days Cash Fixed Asset Turnover Debt Ratios Increased Relying on debt to raise funds Times Interest Earned dropped due to higher interest obligations S W O T Management Team Board of Directors Brand Recognition Supply Chain Management Access to Debt Financing Product Synergies Innovation in Manufacturing Adapt Existing Technology Economies of Scale High CEO Turnover Poor Marketing Plan at Duracell No Consolidation at Duracell Poor Cash Management Highly Leveraged Falling Share Price Small International Presence Unable to Translate Effencies New Markets in Asia (China & India) Takeovers, Acquisitions & Mergers Technological Innovations Discount Retailers Alliances with Other Companies Portable Electronics Market High Level of Competition Low Cost Competitors Lawsuits Product Development for Retailer Brands Cheaper Technology Secondary/Rechargable Battery Markets T. O. W. S. Expand to discount retailers in U.S.A. Create alliance with Indian distributor Sell Braun Use push strategy to market products in discount retailers Enter capitve company arrangement with electronics manufacturer Sell Duracell Change pricing strategy Produce retailer branded batteries T.O.W.S. Evaluation Criteria Does it fit with current strategies? (10%) Will the Board like it? (35%) Will it use up scarce company resources? (35%) Is it risky? (20%) Sell Braun Sell Duracell Electronics Company Retailer Consolidate Company Examine Business & Functional Level Strategies Realign distribution channels Thank you for your attention
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